Posted
by
timothy
on Sunday November 04, 2012 @05:25PM
from the villagers-with-pitchforks dept.

New submitter dryriver writes with this snippet from the BBC: "Apple paid only $713m (£445m) Tax in the year to 29 September on foreign pre-tax profits of $36.8bn (£23.0bn), a remarkably low rate of 1.9%. Apple channels much of its business in Europe through a subsidiary in the Republic of Ireland, which has lower corporation tax than Britain. But even Ireland charges 12.5%, compared with Britain's 24%. Apple is the latest company to be identified as paying low rates of overseas tax, following Starbucks, Facebook and Google in recent weeks. It has not been suggested that any of their tax avoidance schemes are illegal. Many multinational companies manage to pay substantially below the official corporation tax rates by using tax havens such as the Caribbean islands."

Overstated inefficiency of government organizations? I see we have never worked for one. I have. The difference between government and business is night and day. Breathtaking inefficiency, in areas I would never have considered inefficiency could exist. Seriously, it's quite creative.

Overstated inefficiency of government organizations? I see we have never worked for one. I have. The difference between government and business is night and day. Breathtaking inefficiency, in areas I would never have considered inefficiency could exist. Seriously, it's quite creative.

And your single experience makes your argument completely true? I do not doubt the existence of government inefficiency. I have seen it. But I have also seen inefficiency in private corporations, especially when they enjoy a monopoly position. And I have seen very efficient government run organizations. My assertion wasn't that governments are always efficient, but instead that their inefficiencies are often overstated.

A good example is in the health care sector. By any objective standard, the private US healthcare system is highly inefficient. Healthcare in the US costs more per person than almost anywhere else in the world. And yet broad spectrum health outcomes are very poor. In addition, US healthcare doesn't cover a shockingly large percentage of the population. Contrast this with countries with public healthcare systems. Norway and Canada are excellent examples. They manage to cover the vast majority of the population, while their costs per person are far lower than in the US. And broad spectrum health outcomes in these countries are far better than in the US.

The difference is actually fairly simple to understand. In the US, the "institutional purpose" of healthcare companies is to make a profit. That's it. Their goal is not to make people healthy, but to earn a profit. And because the healthcare industry is an inherent monopoly or oligarchy, they use their power and dominant positions to overcharge people and/or deny them coverage. In doing this, they are merely fulfilling their "institutional purpose".

Contrast this with well run public healthcare systems. In such systems, the "institutional purpose" is to make people more healthy. Doctors are always taught to have this goal, and take the Hippocratic Oath, even in the US. The difference though is that in well run public healthcare systems, the managers above the doctors also share the desire to improve people's health, while in the US, improving people's health is secondary to the goal of maximizing shareholder return.

There are successful private systems elsewhere in the world (Switzerland for example), but even in Switzerland, the government has its boot on the throat of healthcare companies. They are simply not allowed to misbehave, as they are in the US. The inherent problem, which most of a right wing bent seem to ignore is that of monopoly. There are some industries that cannot possibly have real competition. And when you have a private monopoly, it the worst of all possible worlds. Monopolistic companies can behave as they want with impunity. If competitors arise, they buy them out or use their power to crush them. Customer choice is limited, and thus so is customer power.

I find the ideological division and characterization of private efficiency and public inefficiency is intellectually lazy, and ignores the subtleties of the complex real world. Ideologies are crutches for those who don't wish to really think.

Businesses go way beyond tax avoidance. They bargain with local governments for tax breaks in exchange for locating there. Is that unfair? Maybe, maybe not. Is it against the public interest? Absolutely! Their interests do not always diverge from the public interest, but very often they do.

Businesses go further than that. They lobby for favorable laws, favorable spending, tax treatment etc. Look how hard Amazon fought against paying sales taxes. Amazon even tried to force the issue by shutting down all facilities in those states that tried to collect, to punish them. What's the difference between what they do and bribing? Perhaps just semantics. At any rate, it's all gone too far. They take the profits, and stick the rest of us with the bills. If Amazon won't pay tax, then they can remove their sorry asses from my state and good riddance. Don't let the door hit your butts on the way out, Amazon. We don't need those kind of businesses.

No doubt that banks, shopping malls and developers have more say in, for instance, road and street planning and traffic light placement and timing than any mere representative of the public, such as a city planner or mayor. And it's obvious they have no vision. They think only of themselves. Running a business is hard. They're looking for every edge, and they purposely disregard all other considerations. Social good be damned, except insofar as that's good for business. How should the lights be timed to drive the most people to their stores? They actually prefer badly timed lights on the idea that the more time people spend in front of their stores, the better business will be. And taxes? They care little if a city is driven to its knees because they got too good a deal on taxes, bargained too hard and sharply, and snookered the representatives of the moment. They feel no responsibility whatsoever for that. The cities are there for them, providing transportation, water, sewage, electricity, law enforcement, emergency services, and of course, customers. How quickly the police jump when business whistles! That overzealousness has lead to many embarrassing incidents over the years, things like the police being called to harass bank customers who wanted to close their accounts and weren't doing anything wrong, and border agents confiscating prescription medicines. But they sure aren't there for their cities. Indeed, they have the gall to whine that we aren't friendly enough to business. Joe Consumer can pay for the police and all the rest, but that's not enough, not for them.

NO country can "close the loopholes" as another suggested because we are not talking about the laws of ONE country, we are talking about the laws of ALL countries as they can bounce a billion dollars through a dozen nation s in less than a second.

Alas yes. What Apple (and google, and many other companies) are using is the 'dutch sandwich' or 'double irish'.

The end goal is to get the money to a 'parent' company in say, bermuda or the cayman islands - the carribbean islands generally have very low tax rates - often zero - and more importantly, special tax status in Europe because of their colonial history.

But you can't transfer money tax free from most european nations to the carribbean any more, because that loophole has been closed in the last few years in most places. So you first transfer it to a 'parent company' in the netherlands, as transfers within the EU are generally allowed and tax free. Then, since the netherlands DOES allow you to transfer it to the carribbean tax free, you transfer it to the 'parent company' in say, Bermuda. So now you have almost all your profits being channeled to the netherlands, and then the carribbean tax free. Corporation taxes are only applied in the final destination, and surprise, they're zero rated. So now you have billions of pounds/euros slowly accumulating in offshore accounts, pretty much tax free and entirely legal. The 'parent companies' in the netherlands and carribbean are merely holding shells with a lawyers office - one building in Grand Cayman has 18,000 US companies registered at it.

Then all you need to do is wait for a tax amnesty*, and you can 'inshore' the money in huge quantities. Or since pretty much everyone is doing it, you transfer the money from one company to another without ever leaving the carribbean. Hell, half the time you don't even have to leave the building. The bank of course is all electronic, and many of them are only available for outside companies. There are entire legions of legal firms and accounting firms and banks all set up to use this 'dutch sandwich' route it's so popular.

* the US has regular tax amnesties, which allow companies to bring money back on-shore legally for a special one-off low tax rate - the government's argument is it's better to collect some tax than no tax if it continues to live in Grand Cayman.

The starting point is often Ireland; since they have low taxes compared to the rest of the EU, they're a good place to put the actual company and what few people you actually employ inside the EU. So what few taxes that are unavoidable they do pay are at a lower rate of about 10%, instead of the 20% or higher elsewhere in the EU.

Luxembourg is popular for other reasons - they have a VAT rate of 15%, but many things are zero or low rated at 3%. In the EU, you only pay VAT once, in the originating country. So if you order something from France or Germany in the UK, you pay local VAT; and because of the EU free trade laws, you don't pay any import duty or UK VAT (if you import from outside the EU, you pay VAT plus any import duties at the border) so that means if you're selling 'things' inside the EU instead of services, you can pay the Luxembourg VAT rate. Amazon, for example, is based in Luxembourg for all their EU operations. They actually pay 3% VAT for ebooks, but charge the same price as other UK based sellers (which have to pay 20% VAT) - Amazon just get to keep the 17% difference. Or use it to undercut prices on a few headline books, to hook people into buying Kindles. They then pull a dutch sandwich on the corporate profits; what little they do pay goes to luxembourg. The UK sees virtually no taxes at all, as the physical warehouses are counted as merely a 'distribution network' - in effect, an extension of the postal system. The actual goods in them belong to the holding company in luxembourg on paper, and that's who you buy from on the website. So It doesn't actually matter if you buy from Amazon UK, or DE, or FR - they're all just local language versions of the

Letters of Marque were almost never used directly against ARMED aggressors. They were simply authorization for privately owned warships to engage in piracy against weakly armed merchant shipping. It isn't like the pirates would go looking for other warships to tangle with. Sure, the nations the targeted ships belong to might have been armed, but piracy was essentially what we would today call terrorism - avoiding regular combat and attacking civilian shipping.

Whether you call them Letters of Marque or something else, this measure probably would be pretty effective at discouraging the use of tax havens.